bobisbankrupt http://bobisbankrupt.com "bk with attitude" Fri, 27 Feb 2009 17:42:17 +0000 http://wordpress.org/?v=MU en hourly 1 http://www.gravatar.com/blavatar/5024d078d2ceb21f7c59ede3cb0231f1?s=96&d=http://s.wordpress.com/i/buttonw-com.png bobisbankrupt http://bobisbankrupt.com Try It. See If It Works. /2009/02/27/96/ /2009/02/27/96/#comments Fri, 27 Feb 2009 08:24:13 +0000 bobisbankrupt /?p=96 ]]>

I was walking through a local Peet’s Coffee last December.  It was late afternoon. The place was populated with people sitting at tables staring into laptop screens in the fading sunlight.  

My bankruptcy was moving towards discharge.  I had just come to terms with the end of my assistant sound editing career and was beginning to mentally germinate this blog.  Before that day, I had always wondered what all of these able-bodied working age adults were doing sitting at their computers during regular working hours. 

It hit me.  Some of them were probably bloggers.  And I was about to become one of them.

I wasn’t looking at an aggregation of odd, immature behavior.  I was looking at my future, the new phase, the next challenge.  It wasn’t scary.  It felt good.

From Ray Bradbury:

“Life is trying things to see if they work.”

]]>
/2009/02/27/96/feed/ bobisbankrupt
Let There Be Victory /2009/02/27/let-there-be-victory/ /2009/02/27/let-there-be-victory/#comments Fri, 27 Feb 2009 07:58:19 +0000 bobisbankrupt /?p=92 ]]>

After nine months of immersion in financial difficulty, unleashing this blog this week has been a bright spot.  Thanks to comments and links from Portfolio’s Felix Salmon and The New York Times’ Freakonomics to a 25-year-old techie guy in Malaysia, this site has had over 4,000 views since Monday.  

This begins my re-entry into the writing world I left 27 years ago when I quit my newspaper job to go to film and TV graduate school.  It feels good to be back, like I’ve come home.  We’ll see where this takes me.   

My new mantra is “Jai Ho,” the Academy Award winning song from “Slumdog Millionaire.”  The title means “let there be victory” in Hindi.

Let there be victory, for all of us:

]]>
/2009/02/27/let-there-be-victory/feed/ bobisbankrupt
Costs, Yes. Scars, Never. /2009/02/26/costs-yes-scars-never/ /2009/02/26/costs-yes-scars-never/#comments Thu, 26 Feb 2009 20:36:05 +0000 bobisbankrupt /?p=87 ]]>

Wendy writes: 

“What was the cost to you for your bankruptcy….that is, your credit cards are gone and you’re starting anew and I’m really happy that you get a do-over… 

But we all hear about folks who file bankruptcy and it sounds like the easy way out.

Surely it isn’t. I would guess the process for people is a lot like rehabilitating themselves from drugs. But folks with a chemical dependency, for example, will live with the re-building of their personal lives, relationships and often physical body.

So I’m asking…show me your scars. What’s stopping me from charging up storm on the $100,000 in credit I have with a plan to file and make it all magically go away.”

For me, the upfront cost was $2,500 for my attorney retainer, credit counseling courses and filing fee. 

Life without credit cards is not carefree.  My car transmission melted down last Saturday, and I have to borrow another $2,800 from my sister to have it rebuilt (yes, I have a plan to pay it back).  I HATE asking others for financial help, but I have no other alternative.  If I had a credit card, I could have charged it and paid it down.

Yes, that could be a down payment on a new car, but I am broke and have damaged credit at the moment, so that’s not an option.  My credit will improve after I responsibly use a secured credit card for a year or so, but even then the lenders would look at the BK on my record, sharpen their knives and charge me Shylockian interest rates.  I MUST keep my 22-year-old car running, which runs up the stress whenever I have to take it in for repairs and hope it can be fixed for a reasonable amount.  If my car completely dies, I’m f’ed.  

I have to stay in my apartment at all costs, as well, because landlords are reluctant to rent to people with bankruptcies on their records.  In my case, this isn’t so bad – I live in a rent control apartment five blocks from the beach.  Even so, this adds another financial razor’s edge to my life.

When I first met with my attorney last July, I was so stressed out I couldn’t properly fill out the retainer check.  You’re right - filing a consumer debt bankruptcy is similar to drug rehab.  You can’t imagine living without your credit cards to fall back on.  Once they’re gone, you have to rethink and rebuild your economic life, especially if, as in my case, your BK is tied to the evaporation of a 25-year career.

Declaring bankruptcy is a public admission of financial failure in a financial-failure-averse culture.  I went through a lot of serious soul searching to get to a place where I could see myself as someone who faced a tough decision and carried it through.  Unless you’re a financial sociopath (google “Bernard Madoff”), bankruptcy is not an easy way out.  It carries with it emotional turmoil, social stigma and economic costs. 

I cannot show you my scars because I do not consider myself a scarred person.  I once read of a pack of beagles from Virginia in a hunting competition in Arizona.  They had never been in a desert environment.  Whenever any of them stepped on a cactus thorn, they would stop, yank it out with their teeth and get back on the trail.     

I have had friends who have died of cancer.  I’m sure any one of them would’ve gladly traded their disease for Chapter 7 bankruptcy. 

I walked through the fire and came out on the other side.  Bring me that horizon.

What’s stopping you from charging up your $100,000 in credit?  From a physical standpoint, nothing.  I’m sure there are retailers, airlines, hoteliers and Vegas casinos who would love to have your business in this recession.  

If you go on a spending binge and max out in a short time, however, your creditors and bankruptcy court may consider this credit card fraud and challenge the discharge of your debts.  Which means they won’t magically go away.  

 

     

]]>
/2009/02/26/costs-yes-scars-never/feed/ bobisbankrupt
When My Debt Discharge Letter Arrived, I . . . /2009/02/26/when-my-debt-discharge-letter-arrived-i/ /2009/02/26/when-my-debt-discharge-letter-arrived-i/#comments Thu, 26 Feb 2009 07:48:41 +0000 bobisbankrupt /?p=78 ]]>

My attorney’s copy of my Chapter 7 debt discharge letter arrived in my mail Jan. 17.

The miles of pacing around the neighborhood and up and down the beach, the mental and emotional turmoil, the fear of creditors coming after me, all of it was brought to an end with one matter-of-fact, anti-climactic sentence:

“It appearing that the debtor is entitled to a discharge, IT IS ORDERED: The debtor is granted a discharge under section 727 of title 11, United States Code, (the Bankruptcy Code).” 

“This document is proof that you have been discharged from all of your dischargeable debts held prior to your filing of the case,” my attorney said in his cover letter. 

Translation: my credit card debt was gone.

I had been waiting for this for months.  Actually, I had been dreaming of being debt free for years.  I just didn’t think I’d declare bankruptcy to get there.  Now, it was done. 

I had it all planned.

I poured an extra, big glass of my favorite wine (La Boca Malbec, $2.99 at my local Trader Joe’s). 

I opened iTunes.  I will dictate in my will that one piece of music be played at my memorial service. “Flamenco Sketches” from Miles Davis’ “Kind of Blue.”

Miles’ slow, bittersweet, muted trumpet filled the room.  I opened Quicken and brought up my account list. 

I opened each credit account, entered “bankruptcy discharge” in the last payee/category field and the account balance in the payment field, zeroing it out.  Then I went to each account’s edit window, zeroed out the credit limit and checked “hide in lists.” 

Where I once had 11 accounts listed, I now had two, my checking and savings.  I have never felt so relieved.

I played two more songs.  

PBS ran a Josh Groban special one night last June. 

I hadn’t worked since January.  I was facing bankruptcy.  I hate asking for financial help, and I was about to ask my sister for a bridge loan to retain my attorney.   

Groban sang “You Are Loved (Don’t Give Up).”  A year before, I would’ve dismissed this song as a piece of pop sentimentality.  On that summer night, I thought of the family and friends I knew would stand by me, and it moved me to tears. 

Six months later, I had made it to the other side. 

I have been a hardcore Frank Zappa fan since high school.  “Peaches En Regalia” is the quintessential Zappa song, intricate, edgy, way ahead of its time.  It’s also triumphant, the kind of song you play when you’ve left one phase of your life behind and are embarking upon another.

For your listening pleasure:

 

]]>
/2009/02/26/when-my-debt-discharge-letter-arrived-i/feed/ bobisbankrupt
Secured Credit Cards /2009/02/25/secured-credit-cards/ /2009/02/25/secured-credit-cards/#comments Wed, 25 Feb 2009 08:12:14 +0000 bobisbankrupt /?p=75 ]]>

To get credit, you have to use credit.  For those of us coming out of bankruptcy, this means putting down a couple of hundred dollars for a secured credit card.  Use no more than 30 percent of your credit and pay it down every month and you will eventually be deemed worthy of an unsecured credit card like all of the other grownups have.  

My goal is ONE unsecured card with no more than a $5,000 limit.  No more $49,000 credit lines for me, and all 4 percent APR courtesy checks will be  shredded with extreme prejudice.

Bankrate is a good place to look for good deals on secured credit cards.   Liz Pulliam Weston of MSN Money lists three criteria to look for:

  • No application fee and reasonable annual fee. Some secured cards tack huge upfront and annual charges onto their accounts; you don’t need to pay these to build your credit.
  • Reports to the major credit bureaus. You’re not doing your credit score any good unless your payment history is being reported to the three major bureaus: Equifax, Experian and TransUnion. Before you apply for a card, call and ask if the issuer regularly reports to all three.
  • Converts to an unsecured card after 12-18 months of on-time payments. Good behavior should get you upgraded to a regular credit card within a year or two.
  • ]]>
    /2009/02/25/secured-credit-cards/feed/ bobisbankrupt
    “Just Say Yes To Cram Downs” /2009/02/25/say-yes-to-cram-downs/ /2009/02/25/say-yes-to-cram-downs/#comments Wed, 25 Feb 2009 07:50:23 +0000 bobisbankrupt /?p=68 ]]>

    The US House of Representatives is scheduled to vote Thursday on a bill that will enable homeowners to modify their mortgages in chapter 13 bankruptcy.

    These mortgage modifications are known by the more vernacular term, “cram downs.”  Under the proposed law, a bankruptcy judge could reduce the balance of a first mortgage to fair market value and re-amortize it, reducing the monthly payments and making it easier for financially distressed homeowners to keep their homes.  Chip Parker of Bankruptcy Law Network explains in detail here.

    This legislation would help stem the tide of foreclosures by encouraging lenders to cram down mortgages out of court on terms they negotiate with the homeowner rather than having a bankruptcy judge impose them. 

    Either way, fewer economically strapped homeowners would lose their homes and house prices in neighborhoods decimated by foreclosures would have a chance to stabilize.

    Members of the mortgage industry are rattling the bars of their playpens in protest.  Permitting chapter 13 mortgage cram downs would have long-term regulatory side effects, as described in “Just Say Yes To Cram Downs” by the late, great Tanta of Calculated Risk:

    In fact, I have some sympathy with the view that mortgage lenders “perform a valuable social service through their loans.” That’s why, when they stop doing that and become predators, equity strippers, and bubble-blowers instead of valuable social service providers, I like seeing BK judges slap them around. Everybody talks a lot about moral hazard, and the reality is that you’re a lot less likely to put a borrower with a weak credit history, whose income you did not verify and whose debt ratios are absurd, into a 100% financed home purchase loan on terms that are “affordable” only for a year or two, if you face having that loan restructured in Chapter 13. 

    ]]>
    /2009/02/25/say-yes-to-cram-downs/feed/ bobisbankrupt
    Oh, Yeah. The photo. /2009/02/24/oh-yeah-the-photo/ /2009/02/24/oh-yeah-the-photo/#comments Tue, 24 Feb 2009 07:50:46 +0000 bobisbankrupt http://bobisbankrupt.wordpress.com/?p=65 ]]>

    The photo of my burning credit cards is symbolic on several levels.

    I burned them after I received my Chapter 7 debt discharge letter, which finalized the death of my old credit lines.  The cards were completely useless.  It was time for them to go. 

    Burning my cards symbolically cleansed my irresponsible financial habits and started a new life of living within my means.

    It is symbolic of our culture of easy credit and instant financial gratification going up in flames. 

    What rises from the ashes will be up to us.    

    ]]>
    /2009/02/24/oh-yeah-the-photo/feed/ bobisbankrupt
    BK 101 /2009/02/24/bk-101/ /2009/02/24/bk-101/#comments Tue, 24 Feb 2009 07:42:37 +0000 bobisbankrupt http://bobisbankrupt.wordpress.com/?p=62 ]]>

    From Bloomberg:

    ]]>
    /2009/02/24/bk-101/feed/ bobisbankrupt
    The Horror . . . The Horror /2009/02/24/the-horror-the-horror/ /2009/02/24/the-horror-the-horror/#comments Tue, 24 Feb 2009 07:29:03 +0000 bobisbankrupt http://bobisbankrupt.wordpress.com/?p=59 ]]>

    Robert Allen Stanford, the alleged mastermind of this month’s Ponzi scheme, once boasted of his plan for a private island mega-resort, a Club Med on steroids for the exponentially rich.  From Dealbook:

    In an October 2008 article, Mr. Stanford told Forbes that he was planning to build an elite resort on what the magazine described as an “undisclosed island in the Caribbean.” At the time, Mr. Stanford said that he was working with 17 architectural and engineering firms to build 30 mansions for a development to be called the Islands Club.

    Scheduled to open in 2011, it would have featured the largest private aviation complex in the world, Forbes said, with enough room to park 100 private jets as well as a jumbo marina with enough dock space for 30 massive yachts. The super-exclusive resort would require members to shell out a $50 million deposit, which would be refunded if they left the development. That was on top of the $15 million annual membership fee.

    Dealbreaker took a James Bond angle:

    All we need now is to blow up Tim Geithner’s seaplane with a solar powered laser and for Nick Nack to show up and start tempting regulators into a funhouse gun battle on the Man With The Golden Gun’s private island.

    New York Magazine’s Daily Intel took its cue from “Lost,” pasting Stanford’s head on Ben’s parka-clad body as he was about to turn the wheel in the Orchid Station’s secret underground cavern (you can watch the show online).

    I see a combination “Wall Street” sequel/“Apocalypse Now” tribute (is this a great pitch or what?):

    • Bud Fox (Charlie Sheen) is finishing his time in a post-prison federal halfway house.  Men from an undefined agency visit him and make an offer; “terminate the Ponzi – with extreme prejudice” and he will receive a presidential pardon.  Charlie reprises his dad’s role in “Apocalypse” and gives the publicists a great marketing hook.

    • Fox enlists mercenaries to take him on the boat trip to Stanford’s island compound.  Imagine his surprise when the mercenaries’ leader turns out to be Gordon Gekko (Michael Douglas).  Gekko has made his peace with his anger towards Fox for ratting him out, especially now that Gordon can act out his aggression on his clients’ perceived enemies.

    • En route to the island, Fox watches a DVD of Stanford rambling on about his funds’ consistent, market-proof 14 percent returns.  “Listening to him on the DVD,” Fox’s narration intones, “it was obvious Stanford had gone completely insane.”

    • The guys stop off at a grubby island backwater where they are treated to a cabaret show starring Britney Spears, Lindsay Lohan and Kim Kardashian.  Oliver Stone makes a cameo as their dissipated, world-weary manager.

    • They arrive at the island and find a bald, bloated Stanford ruling over a multi-mansion jungle compound populated by fugitive Mexican drug lords, has-been Republican Senators and deposed Wall Street kingpins who worship Stanford as a living God.  The bodies of corporate whistle-blowers and SEC regulators hang from the trees.  Stanford lumbers around babbling incoherently.

    This is as far as I’ve taken it.  Just the time of day, you know?           

     

     

     

     

     

     

     

     

     

    ]]>
    /2009/02/24/the-horror-the-horror/feed/ bobisbankrupt
    How I Got Here - A Journey To BK, And Beyond /2009/02/23/how-i-got-here-a-journey-to-bk-and-beyond/ /2009/02/23/how-i-got-here-a-journey-to-bk-and-beyond/#comments Mon, 23 Feb 2009 00:48:27 +0000 bobisbankrupt http://bobisbankrupt.wordpress.com/?p=51 ]]>

    I beat Lehman Brothers to bankruptcy court by five days last September.  My path to BK began in 1994, when I triumphantly paid off $15,000 in credit card debt I had accumulated during the dry spells in my career as a freelance Hollywood assistant sound editor. 

    Did I learn my lesson and resolve to stringently budget myself and never live off my credit cards again?

    No.

    I went through an ongoing cycle of hot work years followed by cold ones.  My plan (if I even had one) was to dip into my credit to get by in the cold years and pay it down in the hot ones.  My last weekly salary was $1900 a week.  If I worked eight or so months a year for three or four years straight, I could bring my debt under control.

    My debt began to grow as the cold years multiplied (1996, 1997, 2002, 2005, 2007, 2008) and I went back to using credit cards to pay my rent, basic expenses, and other credit card bills.

    I confess.  I did it.  There were way too many beers, breakfasts, dinners and glasses of wine in restaurants where you pay up for the privilege of sitting in a chair two blocks from the beach.  There were plane tickets to visit family and friends and charges for concert tickets, weekend kayak trips, books, CDs and whatever else my impulses led me to buy.

    I do not wear a closet full of designer suits or watch a flat-screen TV the size of an emerging nation. I bought my car and stereo system in 1988.  I have never been to Europe or South America or any other far-flung continent.  I did not run up my cards with martinis, blackjack and lap dances in Vegas.  Most of my debt was accumulated in an attempt, however misguided, to stay afloat in a feast-and-famine industry. 

    I entered a self-inflated, denial-laden fog, believing I could go on without seriously sitting down and working out a simple household budget.  Surely I would have a couple of flush work years in a row and pay the debt down.  This turned out to be the personal finance equivalent of an ongoing, multi-year crap game.   

    My creditors were my willing and enthusiastic enablers.  One raised my credit line to $49,500 and with every bill sent me “courtesy” cash advance checks offering three or four percent interest for the life of the balance.  These came with letters telling me I was one of their most dependable and worthy debtors.  Use these checks to go on vacation!  Remodel your home!  Pay your taxes! Pay off higher interest credit cards! Or write out a check to yourself! You deserve it!

    I wasn’t paying 15 or 20 percent interest like other people.  I thought I was being smart, just like they said I was.  Now, I know what device every financially responsible adult should own.  A shredder.

    Due to film industry contraction, I worked four months in all of 2007, one month in 2008.  I got offers for a couple of those 0 percent introductory rate cards and ran those up. My biggest creditor sliced $4,000 off of that $49,500 line.  My unemployment ran out last May.  I could see the concrete blast wall at the end of the tunnel.  

    The mental fog began to burn off in June when my therapist told me I would have to go bankrupt.  If I didn’t, I would go through life dragging my debt, and the dead past it represented, behind me.  

    I took a lot of long walks on the beach and around my neighborhood, turning my new normal over and over in my mind.  Bankruptcy was giving up.  Defeat.  Dishonor.  There were, however, no alternatives.

    My moment of clarity came in late June. I got online, found a website where I could find a local BK attorney and typed in the amount of my credit card debt and my monthly income.  Ten minutes later, a woman representing the site called.  A local attorney called within a half hour after that.  When you type in $92,000 of credit card debt against 0 monthly income on a bankruptcy website, you’re bound to attract attention.

    I borrowed money from one of my sisters, retained the attorney and began my reality-based life.  After steadfastly denying there was a recession for months, President Bush extended unemployment benefits.  This and the bridge loan gave me enough to cover my basic expenses.  I discovered a delicious $2.99 Malbec at Trader Joe’s.  Living within your means is not only possible, it’s a pleasure.

    Filing for Chapter 7 is a legal rite of passage with defined ritual thresholds.  My attorneys prepared my petition. I sent them information about my income, tax returns, possessions, monthly personal budget and every other detail about my financial life.  I went over my petition with them and signed my name more times in an hour than I would in a year.

    I took the required credit counseling and financial management courses online.  The biggest lesson I learned?  Just because creditors lend you money doesn’t mean they really believe you can pay it back.  Duh.

    On the morning of Oct. 6, I drove into downtown Los Angeles for my First Meeting of Creditors, where a bankruptcy trustee and my creditors could ask me questions about my petition. 

    I found the office building where the bankruptcy trustee meetings are held. I looked up as I was turning to circle the block to search for parking.  There, on a building across the street, was a sign for HSBC Bank, one of my creditors. 

    I half-seriously thought they were up there with binoculars, staking me out.  Maybe they would send pit bull attorneys to grill me.  Or a couple of twentysomething frat boy bankers would sit in the back row and belch and cough obscenities when I was called up, like the guys in “Animal House.”

    I nervously scanned my fellow debtors seated in the stark, government-issue room as the trustee moved through the cases ahead of mine.  Every guy wearing a suit or sport coat was potentially one of my creditors.  My name was called.

    Three brown formica tables were arranged in an inverted “U” at the front of the room.  I sat on the left end, the trustee and clerk sat in the center of the middle section, my attorney across from me on the right end.

    The trustee, a short, bald, bespectacled, dapper man, swore me in.  He flipped through my petition.  Did I own any other cars?  Did I have any other retirement accounts?  The questions seemed routine.  I answered “Yes, sir” or “No, sir.” 

    My moment of destiny arrived.  He looked over the room and asked if any of my creditors were present.

    I froze and stared across the table at my attorney.  He glanced over the room.  Silence.  Those suit and sport coat guys were other attorneys.  As is usual in cases like mine, the creditors didn’t show up. 

    The trustee turned to me.  “How old are you?”

    “Fifty-four,” I replied.

    “You’re a youngster.”

    “Thank you. ”

    I have no idea what relevance this had.  Given the setting, being called a “youngster” as opposed to “loser,” “deadbeat” or “financial incompetent” was fine by me.  

    As for those HSBC guys, maybe they were busy trying to figure out if that Madoff guy was for real.  He wasn’t.  HSBC lost $1 billion in Bernie’s scam for the ages.

    Now it was a waiting game.  I faced one more tension-inducing deadline, Dec. 5.  My creditors had until that day to challenge the discharge of my debts.  It passed without a phone call or email from my attorneys.  On Jan. 17, the Holy Grail of all those who choose the Chapter 7 path, my debt discharge letter, arrived in the mail.  My credit card debt was gone.

    So here I am.  My credit, my prized FICO score, the alleged sum total of my worthiness in our culture, is shot to hell.  My twentysomething car is paid off and still runs, but if it dies, I will have difficulty buying a new one.  If the earthquake fault running under my apartment building snaps and my place is red-tagged, landlords will look askance at a prospective tenant with a bankruptcy on his rental application.

    My late father passed on to me the Southern culture of honor in which a man is as good as his word.  I regret that I did not keep my word to my creditors.

    But I feel no remorse towards them.  I did what my creditors wanted me to do.  They had access to my credit reports, they could find out how deep in debt I was, yet they raised my limits and sent me the cards.  They never wanted me to pay it all off.  They wanted me to be their indentured servant for life.

    And they made money from me, from the interest I paid them and the commissions they earned selling my debt to other lenders.  At least three different banks passed that $49,500 credit line amongst themselves.  My other cards also changed banks a couple of times.  

    I would not be surprised if my credit card debts were packaged into securities and sold to investors, and credit default swaps taken out on those securities, with commissions and fees paid at every turn.  I bet somewhere some banker upgraded from a 300 to 500-series BMW churning my credit card debt and that of others.

    I am not without honor.  There was no financial stress test for me.  Unlike our major banks, I had to admit I was insolvent, I was required to be financially transparent.  I publicly declared my inability to pay my debts, accepted my responsibility for them and gave my creditors an opportunity to contest their discharge.  I did so knowing this would have negative consequences for my credit and financial future.

    Anne Lamott writes of a life in which “you haven’t dragged the old day along behind you.  The hope, the belief is that a new day is upon you now.  A day when you are emboldened…”  

    After my petition was filed, I ran into a friend while running an errand.  He said I looked great, that I was “vibrant.” 

    People were responding to me differently, striking up conversations and engaging me more.  Or maybe I had tapped into a new source of confidence and was engaging them.  I had made a tough, life-changing decision and was following through with it. 

    If I can get through this, what else can I do?  What’s the next challenge, the next act?

    The energy that used to be focused on my debt is now focused on pursuing the life I want.

    A new day is upon me now. A day when I am emboldened.    

     

       

     

     

     

           

     

     

    ]]>
    /2009/02/23/how-i-got-here-a-journey-to-bk-and-beyond/feed/ bobisbankrupt